Using the new FATCA registration website: FAQs for financial institutions

International Tax Alert (US)

International Tax Compliance Alert (US)

As we reported to you last week, the US Internal Revenue Service has opened the FATCA Registration Website as of August 19, 2013. This web-based system enables financial institutions to register themselves and their branches, if any, electronically from anywhere in the world without the need to print, complete and mail paper forms.

Financial institutions worldwide can begin to enter their registration information and use the remainder of 2013 to become familiar with the Website. Starting in January 2014, financial institutions will be expected to finalize their registration information. As registrations are approved in 2014, registering financial institutions will receive a notice of their registration acceptance and will be issued a Global Intermediary Identification Number (GIIN).

For your guidance, we have prepared a series of FAQs to explain the basics of the Website. Our FAQs use the terminology and illustrate the guidance contained in the FATCA Online Registration User Guide.

GETTING STARTED

Before registering, financial groups need to identify and classify all of their entities and branches for purposes of FATCA and determine how each entity/branch will become FATCA compliant. This entails:

Determining the residence of each entity or branch for purposes of how that entity/branch will become FATCA compliant; i.e., either under “classic” FATCA or an intergovernmental agreement (IGA).

Determining whether a Financial Institution will register as a Single, Lead, Member or Sponsoring Entity.

Determining whether there will be a Compliance Financial Institution.

Identifyingwho will be the Responsible Officer.

Identifyingwho will be the Points of Contact.

These are the four key definitions you need to know to use the Website:

1. Financial institution (FI) - an institution that is a depository institution, custodial institution, investment entity or insurance company (or holding company of an insurance company) that issues cash value insurance or annuity contracts

2. Foreign financial institution (FFI) - an FI that is not located in the US and includes (i) an FFI treated as a Reporting FI under a Model 1 IGA, including foreign branches of a USFI; (ii) an FFI treated as a Reporting FI under a Model 2 IGA; and (iii) a foreign branch of a USFI that has in effect a Qualified Intermediary (QI) Agreement

3. Participating foreign financial institution (Participating FFI) - an FFI that: (i) is registering to agree to enter into an FFI Agreement; (ii) is treated as a Reporting FFI under a Model 2 IGA and that is certifying that it will comply with the terms of an FFI Agreement, as modified by the applicable Model 2 IGA; or (iii) is a foreign branch of a USFI that has a QI Agreement in effect and that is also agreeing to the terms of an FFI Agreement, unless such branch is treated as a Reporting FI under a Model 1 IGA

4. United States financial institution (USFI) – an FI that is a resident of the United States

Other terms are defined below.

FAQS: DEFINITIONS, ACTIONS AND DEADLINES

What is FATCA? FATCA is US legislation enacted to curb US tax evasion by requiring FFIs to report certain information to the IRS about their US accounts, including the accounts of certain foreign entities with substantial US owners. Noncompliant FFIs will suffer a new 30 percent US withholding tax (the FATCA Withholidng Tax).

Depending on its residence, an FFI complies with FATCA either under the “classic” regime or an IGA. Under the unilateral, “classic” approach, an FFI in a non-IGA country must follow US guidance contained in the US Treasury Regulations and other administrative guidance. Under the bilateral, IGA approach, an FFI resident in an IGA country complies with FATCA by following guidance contained in the IGA that is entered into by the US and a foreign government.

What is a Model 1 IGA? An agreement between the US or the Treasury Department and a foreign government or one or more agencies to implement FATCA through reporting by FIs to such foreign government or agency thereof, followed by automatic exchange of the information with the IRS.

What is a Model 2 IGA?An agreement or arrangement between the US or the Treasury Department and a foreign government to implement FATCA through reporting by FIs directly to the IRS in accordance with an FFI Agreement, supplemented by the exchange of information between such foreign government or agency thereof and the IRS.

When does FATCA enter into force? FATCA enters into force July 1, 2014, subject to transitional rules.

Why does an FFI register?To commence becoming compliant with FATCA, see our FAQ below on What entities are eligible to register and why do they register?

How does an FFI avoid the FATCA Withholding Tax? By having a GIIN that it will use to identify its status to withholding agents. The IRS will electronically publish GIINs on an IRS FFI List.

What is a GIIN?

A “global intermediary identification number” assigned to a Participating FFI or a Registered Deemed-Compliant FFI after an FI’s FATCA registration is submitted and approved.

GIINs will be issued to FIs and to a USFI acting as a Lead FI or Sponsoring Entity and will be identified on the IRS FFI List.

A separate GIIN will be issued to the FI to identify each jurisdiction, including the FI’s jurisdiction of residence, in which the FI maintains a branch.

A GIIN will not be issued to Limited FFIs, Limited Branches or US branches of an FFI.

An FFI will use its GIIN as its identifying number for identifying its status to withholding agents and for satisfying its reporting requirements.

For information on the composition of a GIIN, consult Appendix B of the FATCA Registraition User Guide.

What is the IRS FFI List? A list that will be electronically posted by the IRS on its FATCA homepage www.irs.gov/fatca, on a monthly basis, setting out Participating FFIs and Registered Deemed-Compliant FFIs for purposes of verification by withholding agents. The first IRS FFI List will be posted on June 2, 2014.

What is FATCA registration? A system for an FI to register itself (and its branches, if any).

What is a branch? A unit, business or office of an FI that is treated as a branch under the regulatory regime of a country or is otherwise regulated under the laws of such country as separate from other offices, units or branches of the FI.

How does an FI register? Electronically on the Website or by filing a paper registration on Form 8957.

The IRS describes the Website as a secure, web-based system that an FI may use to register itself and its branches.

The Website contains the following features: (i) 24-hour-a-day accessibility; (ii) ability to establish online accounts; (iii) security for all data provided on behalf of FIs; (iv) a streamlined environment for FIs to register in one place; (v) tools for FIs to oversee member and/or branch information; and (vi) a customized home page for FIs to manage their accounts.

What is a POC? An individual authorized by the FI to receive FATCA-related information regarding the FI and to take other FATCA-related actions on behalf of the FI. FIs are allowed up to five POCs. A Lead FI (defined below) will be a POC for each FI with respect to which it acts as a Lead.

Where may I find tips for logging into the FATCA Registration System? Find them here.

Should an FI register on the Website or on Form 8957? The IRS strongly encourages use of the Website, although it will accept registrations on Form 8957. Form 8957 cannot be filed before January 1, 2014. The IRS has indicated that those who register via Form 8957 will experience slower processing times than those registering online, and registrants will not receive a GIIN needed to demonstrate FATCA compliance until processing of Form 8957 is completed.

In what language does an FI register?English.

What is the FATCA Online Registration User Guide? A highly detailed, useful guide that provides instructions for completing the registration process online, including what information is required, how registration will vary depending on the type of FI and step-by-step instructions (including screenshots) for each question. The guide reflects the most current instructions for registration. The guide also includes a glossary of definitions used for purposes of FATCA Registration.

The link to new “‘how-to” videos released to assist FIs with FATCA Registration is here.

Can an FI register now? Yes. The IRS encourages FIs to become familiar with the Website by creating their online accounts, inputting preliminary information and refining that information. Commencing in January 2014, FIs will be expected to finalize their registration by logging into their accounts, making any necessary changes and submitting the information as final.

What is the deadline to register? FIs will be able to submit information into the Website as final on or after January 1, 2014. FIs should finalize their registration by April 25, 2014 in order to be included on the first IRS FFI List, which will be posted June 2, 2014.

When is the deadline for a reporting FI under a Model 1 IGA to register?A Reporting FI under a Model 1 IGA will have additional time beyond July 1, 2014 to register and obtain a GIIN in order to ensure that it is included on the IRS FFI list before January 1, 2015,since verfication of a GIIN is not required for withholdable payments made to a Reporting FI under a Model 1 IGA prior to January 1, 2015.

Note, however, that a Reporting FI under a Model 1 IGA should register prior to July 1, 2014 if (i) it maintains one or more branches not governed by a Model 1 IGA; (ii) it is renewing its QI, WP or WT Agreement; or (iii) it intends to be a Lead FI for Member FIs that are not established in, and operated exclusively in, other Model 1 IGA jurisdictions.

What entities are eligible to register?In general, all FFIs other than exempt beneficial owners or Certified Deemed-Compliant FFIs that are part of the same EAG are required to register.

What is an EAG? An Expanded Affiliated Group (EAG)is a more than 50 percent controlled group of corporations (each corporation is a Member) with a common parent that is a corporation. A partnership or any entity other than a corporation is treated as a Member of the EAG if such entity is controlled by Members of the EAG.

What entities are eligible to register and why do they register? The following entities are eligible to register (on behalf of themsleves and their branches) for the specific purposes described below, as well as to obtain a GIIN:

A Reporting FI under a Model 1 IGA that is in effect

A Reporting FI includes an FFI or a foreign branch of an FFI or USFI.

By registering, a Reporting FI obtains a GIIN and authorizes one or more POCs to receive information related to registration on the FI’s behalf.

A Reporting FI under a Model 2 IGA that is in effect

A Reporting FI includes an FFI or foreign branch of an FFI.

By registering, a Reporting FI (i) obtains a GIIN, (ii) authorizes one or more POCs to receive information related to registration on the FI’s behalf and (iii) confirms that it will comply with the terms of an FFI Agreement, as modified by the applicable Model 2 IGA.

A foreign branch of a USFI located in a Model 2 IGA jurisdiction does not need to register unless the foreign branch needs to renew its QI, WP or WT Agreement.

A Non-IGA FFI or branch

By registering, the FFI or branch of an FFI: (i) obtains a GIIN; (ii) is treated as entering into an FFI Agreement to be treated as a Participating FFI; (iii) agrees to meet the requirements to be treated as a Registered Deemed Compliant FFI; or (iv) confirms that it will comply with the terms applicable to a Limited FFI or a Limited Branch.

A Sponsoring Entity FI

By registering, an FI seeking to act as a Sponsoring Entity, agrees to perform the due diligence, reporting and withholding responsibilities on behalf on one or more sponsored FFIs.

Others

By registering, an FI, including a foreign branch of a USFI, currently acting as a QI, WP or WT can renew its QI, WP or WT Agreement.

By registering, a USFI wishing to act as a Lead FI for purposes of registering its Member FIs, can identify itself as such.

What is a Reporting FI? An FI that is treated as a Reporting FI under the terms of a Model 1 or Model 2 IGA that is treated in effect, including a foreign branch of a USFI that is treated as a Reporting FI under the terms of a Model 1 IGA. As noted above, a foreign branch of a USFI located in a Model 2 IGA jurisdiction does not need to register unless the foreign branch needs to renew its QI, WP or WT Agreement.

What is a Nonreporting FI? An entity that is established in a jurisdiction that has in effect a Model 1 or Model 2 IGA that is in effect and that is treated as a nonreporting FI in Annex II of the applicable Model 1 or Model 2 IGA or that is otherwise treated as a deemed-compliant FFI or an exempt beneficial owner under the US Treasury Regulations.

What is a Registered Deemed Compliant FFI? It is (i) an FFI that is registering to confirm that it meets the requirements to be treated as a registered deemed-compliant entity under the US Treasury Regulations; (ii) a Reporting FI under a Model 1 IGA and that is registering to obtain a GIIN; or (iii) an FFI that is treated as a Nonreporting FI under a Model 1 or Model 2 IGA and that is registering pursuant to the applicable Model 1 or Model 2 IGA.

What is a Limited FFI? It is an FI that due to local law restrictions cannot comply with the terms of an FFI Agreement, or otherwise be treated as a Participating FFI or Registered Deemed Compliant FFI, and that is agreeing to satisfy certain obligations for its treatment as a Limited FFI.

What is a Limited Branch? It is a branch that under the laws of the jurisdiction in which it is located is unable to comply with the terms of an FFI Agreement. It also includes a related branch under a Model 1 or Model 2 IGA that is treated as a nonparticipating FFI branch because it operates in a jurisdiction that prevents such branch from fulfilling the requirements of a Participating FFI or deemed-compliant FFI.

What are the steps for registering?Theonline registration process contains four steps: (i) account creation; (ii) registration; (iii) submission; (iv) approval. See below for more information about these four steps.

An FI may register as a Single, Lead, Member or Sponsoring Entity. It is critical to select the correct FI type when creating the account, since it cannot be changed once the account is created.

What is a Single FI?

An FI that does not have any Member FIs.

An FI registering for Participating FFI or Registered Deemed Compliant FFI status for itself or one or more of its branches.

A USFI that is registering on behalf of a foreign branch as a Reporting FI under a Model 1 IGA or that has a QI Agreement in effect.

What is a Lead FI?

A USFI, FFI or a Compliance FI (defined below) that will initiate the FATCA Registration process for each of its Member FIs that is a Participating FFI, Registered Deemed Compliant FFI or Limited FFI and that is authorized to carry out most aspects of its Members’ FATCA Registrations.

A Lead FI is not required to act as a Lead FI for all Member FIs within an EAG. Thus, an EAG may include more than one Lead FI that will carry out FATCA Registration for a group of its Member FIs.

A Lead FI will be provided the rights to manage the online account for its Member FIs.

An FFI seeking to act as a Lead FI cannot have Limited FFI status in its country of residence.

A USFI that is registering as the Lead FI on behalf of its Member FFIs will register as a Lead FFI and be issued a GIIN.

What is a Member FI?

An FFI that is registering as a Member of an EAG that is not acting as a Lead FI and that is registering as a Participating FFI, Registered Deemed Compliant FFI or Limited FFI.

For purposes of registration, a Member FI may also include a foreign branch of a USFI that is treated as a Reporting FI under a Model 1 IGA, or that is renewing its QI Agreement.

A Member FI will need to obtain its FATCA ID from its Lead FI.

What is a Sponsoring Entity?

An entity that will perform the due diligence, withholding and reporting obligations of one or more sponsored investment entities or controlled foreign corporations (Sponsored FFIs).

An FFI that will act as a Sponsoring Entity for one or more Sponsored Entities is required to submit a second registration to act as a Sponsoring Entity.

The Sponsoring Entity will receive a separate Sponsoring Entity GIIN and should only use that GIIN when it is fulfilling its obligations as a Sponsoring Entity.

What is a Compliance FI?

A Participating FFI, Reporting FI under a Model 1 or Model 2 IGA or USFI that agrees to establish and maintain a consolidated compliance program and to perform a consolidated periodic review on behalf of one or more Members FIs that are part of its EAG.

A Compliance FI must meet the requirements to register as a Lead FI.

As part of that registration, the Compliance FFI must identify each Member FI that is included in its compliance group.

A Compliance FI must also have the authority to terminate the FATCA status of each Member FI within its compliance group.

THE FOUR-STEP REGISTRATION PROCESS

STEP 1: Create an account

Who can create an account? A Single FI, a Lead FI or an FI Sponsoring Entity.

Thus, a Single, Lead and FI Sponsoring Entity will be able to create an account and choose an Access Code to log in to the FI’s online FATCA account, and the system will assign a FATCA ID.

What is a FATCA ID? An ID that will be provided to each registering FI and that will be used for purposes of establishing and accessing the FI’s online FATCA account.

Who cannot create an account?

A Member FI cannot create an account; rather the account is created by the Lead FI, which furnishes the FATCA ID and a Temporary Access Code to the Member FI, which then creates a new Access Code.

Branches of an FI cannot create their own accounts, but each branch will be assigned a separate GIIN.

What is an FI’s home page?

After the FI has created its account, the FI home page provides a central location for accessing all relevant information about its FATCA Registration account, including messages regarding FI accounts, next steps and available account options. The registration system allows an FI to add, edit and/or delete portions of the FI Registration.

STEP 2: Complete the registration form

There are four parts to the FATCA Registration form. An FI will need to complete only the relevant parts of the form for the particular type of registration requested.

Part 1 contains 11 questions and must be completed by all FIs to provide the IRS with basic identifying information about each FI. A Lead FI can complete this part for its Members.

Part 2 should be completed only by a Lead FI and must be completed via the FATCA Registration Website. A Lead FI will identify each Member FI for which it is acting as a Lead FI and that is treated as a Participating FFI (including a Reporting FI under a Model 2 IGA), Registered Deemed Compliant FFI (including a Reporting FI under a Model 1 IGA) or Limited FFI. For purposes of registration, a Member FI may include a foreign branch of a USFI that is registering to obtain a GIIN or to renew its QI Agreement.

Part 3 should be completed only by an FI, including a foreign branch of a USFI, currently acting as a QI, WP or WT and that wishes to renew its agreement.

Part 4 must be completed by all FIs and requires an FI to certify that the information provided in the FATCA Registration form is accurate and complete and to agree or confirm that it will comply with its FATCA obligations, if applicable, in accordance with the status or statuses for which it has registered itself or any of its branches.

STEP 3: Submit the registration form

The Responsible Officer will not be able to submit the completed registration form on behalf of the FI until on or after January 1, 2014, although information can be entered in the FI’s account before then.

Responsible Officer certification. In submitting the registrations, the Responsible Officer must certify to the accuracy and completeness of the submission and agree that the FI and its branches, if any, will comply with its FATCA obligations

STEP 4: Receive notice of approval and your GIIN

As registrations are finalized and approved in 2014, a registering FI will receive a notice of registration acceptance and will be issued a GIIN. Only the Responsible Officer and not the POCs will receive the notifications regarding the FIs account status.

FATCA ENTERS INTO FORCE SOON

FATCA will shortly enter into force.

If you have not done so, you need to consider how to become FATCA compliant. This undertaking is complex, particularly for a global financial group.

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DLA Piper is a global law firm with 4,200 lawyers located in more than 30 countries throughout the Americas, Asia Pacific, Europe and the Middle East, positioning us to help companies with their legal needs anywhere in the world.

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